Computer Professional Exemption

Last month, as part of the resolution of the impasse over the California state budget, AB10 was passed and signed into law by Governor Schwarzenegger. This piece of legislation amends California Labor Code Section 515.5, known as the “Computer Professional” exemption to state overtime laws.

Prior to this amendment, Section 515.5 required that “computer professionals” receive at least $36 per hour in order to be exempt from overtime payments. While the original legislation may have had a positive intent, the result was not because in order to qualify for this exemption computer professionals were required to track their hours to verify that they received the hourly minimum.

AB10 was the subject of a great deal of lobbying prior to its passage, with the plaintiff’s bar arguing that it would be the first step in the elimination of all hourly wage requirements. Others claimed the existing legislation was necessary to ensure that computer professionals were paid a living wage. The reality is very different.

AB10 is not about paying fair wages. Qualified computer engineers remain in high demand. This market demand is reflected in the fact that most computer professionals receive an annual salary that far exceeds the $75,000 minimum level set forth in Sec. 515.5 and includes stock options, benefits and other perquisites. And it should be noted that California’s minimum level remains more than three times what is required in other states where the federal standard applies.

AB10 is important to keeping jobs in California. Technology companies consistently rank among the top employers and best places to work in the state. But, we are in an era of increasing globalization where employment opportunities are moving to other states and countries. Some of the most attractive and portable jobs are those of the computer industry. The passage of AB10 brings California law more in line with other states by making the computer professional exemption a true exemption that can be relied on by companies. It will also help reduce the tsunami of wage hour class actions that arose under the previous legislation which resulted in companies paying litigation costs rather than investing in job creation.

In a global economy, California can not afford to be an island if it desires to keep taxpaying jobs for its citizens. Congratulations to the governor and California legislature. AB10 is a positive thing for its technology employers and employees, and for California.

Just one more thing.

I promise, I do have other subjects to write about; however, immediately after my last blog we received some additional news of interest concerning the NetApp litigation.

After NetApp filed its lawsuit to halt adoption of Sun’s open source ZFS technology, we responded by filing reexamination requests with the PTO citing the extensive amount of highly relevant prior art that was not disclosed or considered when NetApp originally filed its patents. The patent office clearly agreed with the relevance of this prior art, as demonstrated by its rejection of the claims across all of the reexaminations. Of these patents, three have been described by NetApp as “core” (US Patent Nos. 6,857,001; 6,892,211; and 5,819,292). Here’s the current status of each of them:

NetApp Patent No. 6,857,001 – The PTO rejected all 63 claims of the patent based on 10 prior art references provided by Sun. In addition, the trial court has agreed to remove that patent from the litigation for now pending the final reexamination by the PTO.

NetApp Patent No. 6,892,211 – The PTO rejected all 24 claims of the patent based on 12 prior art references provided by Sun. There is currently a request pending before the trial judge to stay this patent from the litigation as well.

NetApp Patent No. 5,819,292 – And late last week, we were informed that the PTO has rejected all of the asserted claims of this patent relying on at least two separate prior art references out of the many provided by Sun. (The examiner felt that to consider the other references would be “redundant”.)

Some may recall that the ‘292 (“WAFL” technology) patent was what NetApp’s founder, David Hitz, originally highlighted on his blog as being innovative and infringed by ZFS. However, what this litigation is proving is what we have known all along – ZFS is a fundamentally different, game changing technology.

It’s the same thing we hear from our customers.

More on the NetApp litigation

I recently read Judge Laporte’s Order Construing Claims in the NetApp v. Sun litigation. Judge Laporte is the United States Magistrate Judge who is hearing this case in the Federal Court for the Northern District of California. Reading the order was again a reminder of the breadth and diversity of cases that judges are called to consider. These include everything from antitrust, personal injury and employment lawsuits, to cases involving conflicts over ERISA and some even more unique disputes.

Which makes it all the more impressive when a judge is also able to understand and render a decision relating to highly complex technologies in a patent case as part of a Markman hearing. For those who don’t practice in this area, a Markman hearing (taking its name from the case of Markman v. Westview Instruments, Inc.) is a pre-trial procedure in which each party presents briefs, tutorials and expert witness testimony to establish the meaning of key terms in disputed patents. Aside from the actual trial, the Markman hearing is the most important part of a patent infringement litigation.

On August 27, 2008, the Markman hearing was held before Judge Laporte. In dispute were fourteen phrases in seven patents (four asserted by Sun and three by NetApp) that required the court to determine the meaning of terms like “Domain Name”, “Non-volatile Storage Means” and “Root Inode”, among others. Given the complexity, we were impressed when only two weeks later, the judge issued her order.

And, we were very pleased.

In summary, the court agreed with Sun’s interpretation on six of the disputed terms (two of which the court adopted with slight modification) and with NetApp on one. As to the remaining terms, the court either formulated its own interpretation or requested that the parties propose a further construction (i.e. definition). If you want to read the Order from the Markman hearing you can find it here.

Most significantly, the Court found each of the asserted claims in NetApp’s 7,200,715 patent relating to RAID technology to be “indefinite” – meaning that someone with experience in this area of technology could not understand the limits of the claimed invention. With regard to NetApp’s ‘715 patent, the court agreed with Sun’s position that the claims of the patent are flatly inconsistent with and impossible under the teaching of the patent specification. In effect, unless NetApp appeals and this finding is reversed, the ‘715 patent is effectively invalidated in this case and against others in the future.

In addition, the Court’s findings on the terms “server identification data”, “domain name”, “portion of a communication” “element of a communication” and “completing a write operation within a local processing node” further strengthen our position that the processors, network interface and systems management software used across NetApp’s product line infringe Sun’s patents.

Meanwhile ZFS and OpenStorage continue to gain momentum.